Author Topic: Average Personal debt ratio hits record high of 163.7% in Canada  (Read 5656 times)

Self-employed-swami

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Average Personal debt ratio hits record high of 163.7% in Canada
« on: December 13, 2013, 06:48:48 PM »
http://www.cbc.ca/news/business/personal-debt-ratio-hits-record-high-of-163-7-1.2462954

:(

And just to think, for every person who has things under control (If you include our house and leveraged investments, we are at about 100%, but we are squarely at 0% for 'personal debt').  They didn't even include mortgages in this.  Scary to think about the person on the opposite end of this average than me!

Blindsquirrel

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #1 on: December 27, 2013, 06:05:36 PM »
  That will not end well at all.

totoro

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #2 on: December 27, 2013, 06:42:44 PM »
It seems like the average Canadian owes $28,853 in credit card/personal debt, but the average monthly payment has dropped to $986 Canadian dollars from C$1,138 in 2012 due to a decline in interest rates.  Most of this debt is due to automobile loans.  Loan delinquency rates in Canada are very low though - 1.66%.

$986 a month to repay debt is significant and if interest rates rise then many Canadians will be in trouble with their mortgages and loans. 

CBC just ran a story about how many boomers are not planning to retire at 65 because they cannot afford to.  If you don't have a private pension and you have been taking on consumer debt it seems to me that it might be difficult for the average Canadian to stop working at 65.

Kaspian

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #3 on: January 03, 2014, 01:44:57 PM »
The debt can't be mostly due to people buying new cars.  If the average car in Canada costs about $32K, this would mean that almost everyone bought a new car.  ...Or at least every second person.  That's way too many new cars. 
There are a lot of arguments on the article back and forth that people aren't getting paid enough, that cost of living is too high, taxes are too high/low, banks are corrupt, that it's a massive housing bubble. Seems nobody wants to say that 163.7% consumer debt ratio is due to pure stupidity, materialism, gluttony, envy, greed, (insert other deadly sins here).  Everyone on the MMM is proof that life doesn't have to be that way.  The majority here have an annual debt ratio of -50%.  We're 240% more badass than the average Canadian! 

(It really is idiocy, BTW.  There can be no other plausible explanation.)

totoro

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #4 on: January 03, 2014, 02:32:13 PM »
The debt can't be mostly due to people buying new cars.  If the average car in Canada costs about $32K, this would mean that almost everyone bought a new car.  ...Or at least every second person.  That's way too many new cars. 
There are a lot of arguments on the article back and forth that people aren't getting paid enough, that cost of living is too high, taxes are too high/low, banks are corrupt, that it's a massive housing bubble. Seems nobody wants to say that 163.7% consumer debt ratio is due to pure stupidity, materialism, gluttony, envy, greed, (insert other deadly sins here).  Everyone on the MMM is proof that life doesn't have to be that way.  The majority here have an annual debt ratio of -50%.  We're 240% more badass than the average Canadian! 

(It really is idiocy, BTW.  There can be no other plausible explanation.)

I'm not sure your math works here.  The debt is spread over a period of time if it is financed.  Ie. you buy a car this week for $32,000 financed over seven years.  There are a lot of people that do this and then at the end of seven years go back for another new financed car.  It is surprisingly (to me) common.

Non-mortgage debt consists of credit cards, car loans, instalment loans and lines of credit. 41% of the debt in in Canada is line of credit debt used for pretty much anything and everything, including car purchases, with very low delinquency rates.

On a positive note, although debt increased this quarter, it was the smallest rate in 12 years and Canadians are also worth more as their assets increase by a similar amount to the debt.  Indeed the average Canadian's net household worth is over $400,000 - about $20,000 higher than the US.

Now, this is not to say that Canadians shouldn't be concerned - if housing prices fall or interest rates jump that differential will evaporate. 

daverobev

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #5 on: January 03, 2014, 09:17:14 PM »
The problem with that net worth increase is that it is probably artificial - it's probably solely in housing (no.. well I spose stocks have gone up too, but...).

True about the car thing, though. If people 'buy' a new car every 3-5 years, they will have half the loan value 100% of the time (assuming they go from 100% to 0% loan over the course of the loan - and I know that is a very unlikely assumption).

Sigh. Still - there'll be a nice glut of used cars in a few years, driving prices down. Maybe houses, too! Hehe.

Sigh.

GuitarStv

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #6 on: January 04, 2014, 09:07:21 AM »
Including the mortgage we're probably sitting around 60-70% . . .  I suspect that super inflated house prices are playing a big factor in these numbers.

Matte

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #7 on: January 04, 2014, 10:43:08 AM »
Not surprised.  I am not in that situation at all, but I can see how it happens.  Real estate plays a big factor, it really forces people between a rock and a hard place.  If your household income is below 100k in a major city your probably better off to rent.  Now more people end up in condos and high rises, often with hugely bloated strata and maintenance bills that they have little control over.  People have themselves to blame too, wanting to live in the standard they grew up in even if its not at all practical. 

daverobev

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #8 on: January 04, 2014, 11:55:32 AM »
http://www.cbc.ca/news/business/2013-auto-sales-up-4-in-canada-8-in-u-s-1.2483065

"Desrosiers Automotive reports 1.7 million cars sold in Canada last year."

Country of 33 million, so 1 in every 20 people bought a new car last year, including children! Heh.

strider3700

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #9 on: January 05, 2014, 12:42:56 AM »
How is this number calculated?   Does it include mortgages?  How do they define disposable income?  The savings rate in BC has been negative for as few years now so I'd assume that means we have zero disposable income.   

If mortgages are included I'm more concerned as my mortgage is 210% of my gross income

Deano

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #10 on: January 05, 2014, 07:10:04 AM »
163% includes mortgages-we have plenty of consumer debt up here, but we're not quite that crazy.

Having said that, our debt-to-income ratio has now surpassed the US' at it's worst. Depressing.

BPA

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #11 on: January 05, 2014, 09:33:32 AM »
If you include mortgages, I owe at least that and I'm okay with it.  I work part-time to both help with raising my special needs son and my own anxiety issues related to raising a kid with special needs.

If I wanted to, I could easily work full-time again and bring the number to under 100%, but I don't want to do that.

Also, I have about the most secure job there is.

Including my mortgage, all should be paid off in 4.5 years when I plan to retire on pension.


Albert

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #12 on: January 05, 2014, 09:35:46 AM »
Mortgage vs disposable income. That doesn't seem to be a very large debt at all or am I missing something here?

Self-employed-swami

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #13 on: January 05, 2014, 01:19:17 PM »
I didn't think they were including mortgages in that number, but I will reread the article.

Deano

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Re: Average Personal debt ratio hits record high of 163.7% in Canada
« Reply #14 on: January 05, 2014, 02:21:07 PM »
I didn't think they were including mortgages in that number, but I will reread the article.

If they didn't include mortgages it is a mistake, this stat has been bandied about for some time, always with mortgages.

If it wasn't including mortgages it would mean the avg. Canadian would owe something in the region of 60-70k…remembering that many Canadians have no debt we would probably be looking at well over 100k in consumer debt for those who owe anything (student loan avg is 27k for new grad and much less as you get away from the school years).

The point is, I think, this number has been increasing and it is now well above the disastrous US mark set in 2008. Scary enough.